Despite its well-defined role as a serum growth factor during fetal liver development and hepatic oncogenesis, the biological significance of cytoplasmic alpha-fetoprotein (AFP) remains incompletely understood. Here, we provide evidence to illustrate that cytoplasmic AFP may function as a regulator in the phosphatidylinositol 3-kinase (PI3K)/AKT pathway in human hepatocellular carcinoma cells. The results demonstrated colocalization and interaction of AFP and phosphatase and tensin homolog deleted on chromosome 10 (PTEN) in the cytoplasm of AFP-producing Bel 7402 and HepG2 cells, with an interaction distance of 12.6 ± 2.7 Å as determined with the fluorescence resonance energy transfer technique. Knockdown of AFP mRNA or inhibition of AFP expression by all trans-retinoic acid resulted in enhancement of the PTEN level with a synchronous decrease in phosphorylated AKT. Transfection of the afp gene into HLE cells (originally AFP negative) led to a significant activation of AKT signaling. The inhibition of PI3K signaling by LY 294002 was simultaneously reversed by transfection, accompanied by diminution of all trans-retinoic acid-induced upregulation of PTEN and enhancement of cell growth. In conclusion, these results demonstrate that cytoplasmic AFP is involved in regulation of hepatocellular growth and tumorigenesis.